S. 1434 would prohibit federal agencies from purchasing design or construction services using a specific type of reverse auction. Unlike a traditional auction where a buyer with the highest bid wins the right to purchase a good or service, in a reverse action a buyer seeking a good or service solicits bids, multiple sellers offer bids, and the seller with the lowest bid wins the competition. The legislation would prohibit federal agencies from using a specific type of reverse auction that allows sellers to submit revised bids during the auction.
CBO reviewed available information on the use of reverse auctions in government procurement contracts for the Army Corps of Engineers and the General Services Administration. In addition, CBO reviewed studies prepared by the Government Accountability Office on the use of reverse auctions. In general, reverse actions have not been suitable for complex contracts like design and construction services because they do not consistently result in procurement costs that are lower than what would result from other contracting methods such as sealed bids or negotiated procurements. CBO estimates that implementing S. 1434 would not require agencies to significantly change their typical contracting process and thus would not have a significant effect on the federal budget.
Enacting S. 1434 could affect direct spending by some agencies (such as Tennessee Valley Authority) that are authorized to spend receipts from fees, the sale of goods, and other collections to cover their operating costs. Because most of those agencies can adjust the amounts they collect as operating costs change, CBO estimates that any net change on direct spending by hose agencies would be negligible.
